By Kevin Knill, Director, Products and Services

Gambling and life insurance – a surprising yet oddly appropriate pair.

That’s what I thought as I walked through The Bellagio doors on a sunny, April day in Las Vegas.

I wasn’t there to play games of chance though – I was at the 2016 LIMRA Life Insurance Conference to learn about disruptive innovation examples in insurance and how Pyramid Solutions can help the industry with advanced case management and analytics – honestly.

I spent three days with hundreds of underwriters, actuaries, technicians and executives. While the Las Vegas scene outside was the same as always, inside I learned of an industry with a vastly changing landscape.

The Explainer: Disruptive Innovation
Harvard Business Review

Disruptive Innovation Examples in Insurance

One of the conference speakers, Tanya Thompson, Chief Underwriter for TIAA-CREF Life Insurance Company, said there is more talk of change in the industry in the last two years than at any time in the past — keep in mind this is an industry that operated on actuarial-based rules and policies for the past 150 years.

All that being said, disruptive innovation was a huge focus of the conference.

The Harvard Business Review defines “disruptive innovation” as the following:

A process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality — frequently at a lower price.

The video above does a good job explaining it.

Who is causing disruptive innovation? Millennials.

We hear this word thrown around a lot but that’s because this generation (20-40-year-olds) truly forges change. According to the Harvard Business Review, disruptors have a very specific sweet spot of where they can be born.

You see, many companies provide their most profitable customers with ever-improving products and services and pay less attention to less-demanding customers.

For insurers, this means their focus continues to be on Baby Boomers, so they tout great in-store experiences. However, less attention is being paid to millennials which creates a space for disruptors to enter. 

Millennials are now the target demographic for new policies and they grew up/are growing up in a technology-saturated world where interactive and instantaneous buying experiences are the norm. Fluids testing, multi-week assessments and decisions processes are foreign, ancient concepts. Insurers that pay specific attention to millennials and provide policies catered to their wants/needs, will thrive. 

What does disruptive innovation look like? Non-traditional products and external players.

A simple payout at death is not enough for these people. Customers want non-traditional insurance products that they can benefit from during life. This is why outside vendors with a lot of capital and massive amounts of data are prime disruptors.

John Hancock Vitality Program

Members of the program earn “Vitality points” by performing healthy-living activities like exercising, getting annual checkups, staying tobacco-free, etc. These activities are tracked through smartphones and watches. The points accumulate throughout the year to put you at a specific Vitality Status. A high Vitality Status means you’ll save more money on premiums and you’ll get rewards and discounts.

Be the Source of Your Own Disruption

Insurers can’t hold their cards any longer. Josh Linkner, an Entrepreneur, suggested that the industry needs to be the source of its own disruption, meaning that new competitive products need to come from within before external players enter the market.

It seems like the best starting point is a more responsive application review process — one that, if possible, underwrites a policy in a day. For more extensive underwriting, electronic medical records hold the promise of delivering a faster decision. Then follow that with non-traditional products.

John Hancock’s Vitality Program is an excellent example of where the market is going. The program rewards policyholders with reduced premiums for making healthy living choices. It’s a win-win and it will change buying habits.

Advanced data processing technology will be a key element of these solutions. Cognitive computing will enhance our ability to correctly identify the risk in a client application. Products that offer self-reporting for fitness club memberships or eating habits and interface with wearable devices that track vitals and fitness levels permit a lifestyle focus. It’s an exciting new world and we’ll be at the table.

Should we deal you in?

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Medical documents are some of the most complex types of documents to capture and extract information from. See how to leverage cognitive capture to overcome these difficult challenges and underwrite life policies faster.

Kevin Knill

Kevin Knill

Director, Products and Services

I lead a team of Product and Application Engineers in developing solutions in the Enterprise Content Management, Network Connectivity and Intelligent Manufacturing industries. Outside of work, I love hockey and playing with my grandson.

This post was originally published May 31, 2016 and updated on May 22, 2018.